Shareholder Support for Oaktree’s Position Suggests Transaction as
Currently Structured is Unlikely to Close

Proposed Deal is the Result of a Flawed Sale Process

Tembec Board Must Explain the Gap Between Rayonier’s Offer Price and
Real Value of Tembec

Success of Transaction Hinges on Empty Votes of Fairfax Financial, No
Longer a Tembec Shareholder

July 17, 2017 09:24 PM Eastern Daylight Time

LOS ANGELES--(EON: Enhanced Online News)--Investment funds managed by Oaktree Capital Management, L.P.
(“Oaktree”), which beneficially owns 19.9% of the common stock of
Tembec, Inc. (TSX:TMB) and is the Company’s largest shareholder, today
urged all Tembec shareholders to vote against Rayonier’s acquisition of
Tembec unless Rayonier’s offer price is increased to reflect fair value.

Oaktree has received significant shareholder support since it announced
its opposition to the proposed transaction on July 14th.
Oaktree understands that other Tembec shareholders have expressed
similar concerns directly to Tembec’s Board.

While Oaktree welcomes the opportunity for a constructive dialogue with
Tembec and Rayonier, Oaktree will continue to put a spotlight on
unaddressed questions to ensure a fair deal for all Tembec shareholders.

Flawed Transaction is the Result of a Flawed and Poorly Timed Process

The Tembec Board of Directors’ claim that the proposed sale to Rayonier
is the result of a comprehensive sale process is misleading and relies
on an apples-to-oranges comparison. In fact, the Tembec Board conducted
a piecemeal process over a number of years, with multiple financial
advisors, offering some or all of the company’s assets at various times,
ultimately creating confusion among strategic and financial buyers.

Importantly, this undisciplined process concluded before Tembec
negotiated 2017 price and volume contracts with key customers –
negotiations that specialty cellulose companies conduct annually in the
first half of November. For 2017, Tembec successfully negotiated
contracts with price and volume increases for the first time in three
years and then discussed its bullish views on specialty cellulose
pricing on both its fourth quarter 2016 earnings call (November 17,
2016) and its first quarter 2017 earnings call (January 26, 2017).
During this time, Tembec’s stock increased 161% to C$3.00 from C$1.15.

Despite this material change in the Company’s performance, Tembec’s
Board took no further action to renew the sale process: Rayonier’s offer
was unsolicited and opportunistic and was not part of any formal sale
process.

Oaktree questions why Tembec would sell itself to an opportunistic
buyer, to the detriment of its shareholders, at a time when its business
is improving. Rayonier’s arguments on trailing share prices ignore the
resurgence in both the company’s financial outlook and the multiple
expansion that contributed to a near-tripling of the value of Tembec’s
shares.

No Explanation for Material Gap Between Rayonier’s Offer and Tembec’s
Intrinsic Value

Oaktree believes that there is a significant value gap that makes the
proposed transaction unfair to shareholders.

No consideration has been given to recognize:

The unique strategic value and generational opportunity Tembec
represents to Rayonier, a company with a significantly shrinking
market, high customer concentration and high-cost production
challenges. It is very rare that a unique and complementary asset like
Tembec comes to market.

The fact that the replacement cost to Rayonier could be greater than
C$10 per share, according to industry analysts.

Comparable businesses trade in the range of 6.6x - 9.9x EBITDA vs. the
inadequate multiple of 2017 consensus EBITDA of 5.0x pre-synergies and
3.9x post-synergies (and as low as 2.9x when including the present
value of Tembec’s substantial deferred tax assets).

Tembec’s highly-valuable deferred tax assets. Oaktree estimates that
on a present value basis these tax assets could be worth as much as
C$250 million, or C$2.50 per Tembec share.

The unusual market reaction to the transaction announcement demonstrates
that this is a good deal for Rayonier, but not for Tembec shareholders:
Rayonier’s share price increased 31% in the week after the announcement,
indicating the market’s opinion that Rayonier negotiated a bargain
basement price for Tembec shares.

Moreover, the Tembec Board then protected this poorly conceived deal by
agreeing to a high termination fee of 4.9% equity value, which will act
as a deterrent to the emergence of a superior proposal.

Will The Tembec Board Count Empty Votes?

On May 25, 2017, the Tembec Board announced the support of then 19.99%
shareholder Fairfax Financial Holdings, yet Fairfax has since ‘voted
with its feet’ and sold its entire position in Tembec. The bulk of its
disposition occurred on June 19, 2017, the record date for the Special
Meeting. It appears, although Fairfax and Tembec have declined to
clarify, that Fairfax is entitled to vote at least approximately 15.9%
of the issued and outstanding shares by virtue of its position on the
record date, despite the fact that Fairfax no longer owns these
shares.

“Fairfax currently has voting rights but no economic interest in Tembec,
and we believe it is simply unfair to Tembec shareholders that Fairfax’s
empty votes should determine the future of a company in which Fairfax
confirmed it has no stake,” said Patrick McCaney, portfolio manager for
Oaktree’s Value Equity strategy. “We believe the Tembec Board has an
obligation to all shareholders to immediately commit to not counting
Fairfax’s empty votes to force through this undervalued transaction.”

A Better Alternative: A Standalone Tembec?

Tembec could generate more shareholder value as a stand-alone entity. On
its own, it is poised to produce as much as C$0.85 per share of
after-tax free cash flow in the twelve months ending September 30, 2017.
This represents a 20% stand-alone free cash flow yield at Rayonier’s
offer price – an attractive yield for a company with strong growth
prospects in its core specialty cellulose ethers business that is
de-levering rapidly.

About Oaktree Capital Management, L.P.

Oaktree is a leader among global investment managers specializing in
alternative investments, with $100 billion in assets under management as
of March 31, 2017. The firm emphasizes an opportunistic, value-oriented
and risk-controlled approach to investments in distressed debt,
corporate debt (including high yield debt and senior loans), control
investing, convertible securities, real estate and listed equities.
Headquartered in Los Angeles, the firm has over 900 employees and
offices in 18 cities worldwide.

Cautionary Statement Regarding Forward-Looking Statements

This press release contains forward-looking statements within the
meaning of the Canadian securities laws, Section 27A of the U.S.
Securities Act of 1933 and Section 21E of the U.S. Securities Exchange
Act of 1934. In some cases, you can identify forward-looking statements
by words such as “anticipate,” “approximately,” “believe,” “continue,”
“could,” “estimate,” “expect,” “intend,” “may,” “outlook,” “plan,”
“potential,” “predict,” “seek,” “should,” “will” and “would” or the
negative version of these words or other comparable or similar words.
These statements identify prospective information, and are based on the
current expectations of Oaktree, estimates Oaktree considers reasonable
and information currently available to Oaktree. Because forward-looking
statements include risks and uncertainties, actual results may differ
materially from those expressed or implied. Risks and uncertainties
include, but are not limited to, those discussed in the Tembec circular
(including the factors listed in the section captioned “Risk Factors” on
page 78), Tembec’s other filings (accessible on the SEDAR website at www.sedar.com)
and Rayonier’s filings with the SEC (accessible on the SEC’s website at www.sec.gov),
integration risk, consensus analyst estimates, currency exchange risk,
risks associated with indebtedness, customer retention risk,
expectations respecting Tembec’s and Rayonier’s prospects for growth,
profitability and debt reduction, availability of synergies,
achievability of tax savings, and cellulose and acetate market
conditions.

Forward-looking statements speak only as of the date of this press
release. Except as required by law, Oaktree does not undertake any
obligation to publicly update or review any forward-looking statement,
whether as a result of new information, future developments or
otherwise. Any financial outlook information contained in this press
release about prospective results of operations, financial position or
cash flows is based on assumptions about future events including
economic conditions and proposed courses of action, based on Oaktree’s
assessment of the relevant information currently available. Readers are
cautioned that such financial outlook information contained in this
press release should not be used for purposes other than for those for
which it is disclosed herein.

Information in Support of Public Broadcast Solicitation

Oaktree is relying on the exemption under section 9.2(4) of National
Instrument 52-102 – Continuous Disclosure Obligations to make
this public broadcast solicitation. The following information is
provided in accordance with corporate and securities laws applicable to
public broadcast solicitations.

This solicitation is being made by Oaktree and investment funds managed
by Oaktree (excluding Oaktree, the “Oaktree Funds”), and not by or on
behalf of the management of Tembec.

The address of Tembec is 100-4 Place Ville-Marie, Montréal, Québec, H3B
2E7.

Proxies for the Tembec shareholders meeting may be solicited by mail,
telephone, facsimile, email or other electronic means as well as by
newspaper or other media advertising and in person by managers,
directors, officers and employees of Oaktree who will not be
specifically remunerated therefor. In addition, Oaktree may solicit
proxies in reliance upon the public broadcast exemption to the
solicitation requirements under applicable Canadian corporate and
securities laws, conveyed by way of public broadcast, including press
release, speech or publication, and by any other manner permitted under
applicable Canadian laws. Oaktree may engage the services of one or more
agents and authorize other persons to assist it in soliciting proxies on
behalf of Oaktree and the Oaktree Funds.

Oaktree has entered into an agreement with Kingsdale Advisors
(“Kingsdale”) pursuant to which Kingsdale has agreed that it will act as
Oaktree’s strategic shareholder, communications and proxy agent.
Pursuant to this agreement Kingsdale will receive a fee of up to
approximately $220,000 plus disbursements.

All costs incurred for the solicitation will be borne by the Oaktree
Funds.

In addition to revocation in any other manner permitted by Law, any
Tembec shareholder executing a proxy form may revoke it at any time, as
long as it has not been exercised, by an instrument in writing executed
by such shareholder or his attorney authorized in writing and deposited
either at the head office of Tembec at 100-4 Place Ville-Marie,
Montréal, Québec, H3B 2E7 at any time up to and including the last
business day preceding the date of the Tembec shareholders meeting on
July 27, 2017, or any adjournment or postponement thereof, or with the
chair of the Tembec shareholders meeting on the day of such meeting or
any adjournment or postponement thereof. For any Tembec shareholder
holding shares through an intermediary, the methods to revoke a proxy
may be different, and such shareholder should carefully follow the
instructions provided by such intermediary.

Neither Oaktree, the Oaktree Funds, nor any of their managing members,
directors or officers, or any associates or affiliates of the foregoing,
has: (i) any material interest, direct or indirect, in any transaction
since the beginning of Tembec’s most recently completed financial year
or in any proposed transaction that has materially affected or would
materially affect Tembec or any of its subsidiaries; or (ii) any
material interest, direct or indirect, by way of beneficial ownership of
securities or otherwise, in any matter currently known to be acted on at
the upcoming meeting of Tembec shareholders, other than the proposed
transaction between Tembec and Rayonier Advanced Materials Inc.

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